Lifeway Foods — Second Quarter 2026 Earnings Summary

Financial Performance

• Net sales for the quarter ended June 30, 2026, reached $66.9 million, a 24.1% year-over-year increase and the highest quarterly net sales in company history, exceeding the prior record by $3.9 million.
• Year-to-date net sales for the first half of 2026 totaled $129.9 million, up 29.9% year-over-year.
• Gross profit margin for the quarter was 19.5%, down from 28.6% in the prior-year period; year-to-date gross margin was 23.4%, compared to 26.4% in the prior-year period.
• Net income for the quarter was $0.1 million ($0.01 per basic and diluted share), compared to $4.3 million ($0.28 per share) in the prior-year period.
• Year-to-date net income was $4.8 million ($0.32 basic, $0.31 diluted per share), compared to $7.8 million ($0.51 per share) in the prior-year period.
• Selling, general and administrative expenses were 18.4% of net sales for the quarter (vs. 17.6% last year) and 17.8% for the first half (vs. 18.8% last year).
• Cash and cash equivalents increased to $7.1 million at June 30, 2026, from $5.6 million at December 31, 2025.
• Accounts receivable increased to $22.9 million at June 30, 2026, from $16.6 million at December 31, 2025.
• Inventories increased to $14.0 million at June 30, 2026, from $11.9 million at December 31, 2025.
• Total assets increased to $132.4 million at June 30, 2026, from $105.6 million at December 31, 2025.
• Total liabilities increased to $47.8 million at June 30, 2026, from $19.8 million at December 31, 2025, driven by a new line of credit balance of $21.9 million.
• Net cash provided by operating activities for the six months ended June 30, 2026, was $4.0 million, compared to $3.8 million in the prior-year period.
• Net cash used in investing activities was $19.3 million for the six months ended June 30, 2026, primarily due to $19.5 million in purchases of property and equipment.
• Net cash provided by financing activities was $16.8 million for the six months ended June 30, 2026, driven by $23.0 million in borrowings under the line of credit and $4.9 million in treasury stock purchases.

Guidance and Future Outlook

• Management views current margin pressure as temporary and expects gross margin and profitability to fully recover in 2027.
• The company anticipates profitability in 2027 to exceed the improvement achieved in the first quarter of 2026 as pricing actions layer in and operational improvements take effect.
• The company expects elevated milk prices to subside as conditions normalize, supported by a positive conventional milk cost outlook for 2027.
• The transformative Waukesha expansion is planned for completion in early 2027.
• Management expects to reinforce category leadership and build long-term shareholder value through ongoing investments.

Business Segments and Product Lines

• Lifeway continues to expand distribution for its portfolio including Lifeway Kefir, Muscle Mates, Kefir Butter, Farmer Cheese, and Organic Farmer Cheese.
• New placements are being gained in mass retail, natural grocery, and foodservice channels, including campus dining and frozen yogurt concepts.
• The company is broadening access to new consumers and increasing consumption occasions through thousands of new retail placements nationwide.

Market and Competitive Landscape

• Lifeway marks its 40th anniversary and maintains its position as America's original authentic kefir brand.
• The company has achieved 27 consecutive quarters of year-over-year net sales growth.
• Four consecutive years of record annual net sales were achieved from 2022 through 2025, with a cumulative increase of 50.1%.
• The company's viral frozen-fruit-and-kefir ice cream hack generated more than 50 million views.
• President and CEO Julie Smolyansky was inducted into the Specialty Food Association Hall of Fame for transforming kefir from a niche product into a mainstream functional-food category.

Risks and Challenges

• Elevated milk prices created the primary margin headwind for the quarter.
• Temporary increases in resin costs for packaging and higher oil-related transportation costs contributed to lower gross margins.
• Forward-looking statements note risks including price competition, consumer decisions, competitor actions, commodity pricing changes, government regulation, and product acceptance.

Management Commentary and Tone

• CEO Julie Smolyansky stated that demand remained robust despite margin headwinds and highlighted the strength of the company's brands and consumer-growth platform.
• Management expressed confidence in the repeatability of the growth platform built over nearly seven years.
• The tone reflects optimism regarding the recovery of profitability in 2027 and the strategic value of the Waukesha expansion.

Other Key Points

• The company celebrated its 40th anniversary with a nationwide campaign featuring "The Lifeway Kefir Shop" pop-up in SoHo, activations in Chicago, Miami, and Los Angeles, and a presence at Lollapalooza.
• The company purchased $4.9 million of treasury stock during the first half of 2026.
• The company secured a new line of credit, resulting in a $21.9 million balance as of June 30, 2026.
• The company's products are sold across the United States, Mexico, the United Arab Emirates, Central America, and the Caribbean.